Data centers in Phoenix, Arizona form a hub for compute, storage, and communications exchange in the southwest region of the United States. While the market’s connectivity-rich carrier hotels, from colocation providers like Digital Realty and phoenixNAP, are located in and around the downtown area of Phoenix, the purpose-built wholesale data centers, from operators such as CyrusOne, Iron Mountain, and Digital Realty, have been built in Phoenix’s surrounding suburbs, such as Chandler, Arizona.
In total, Phoenix, Arizona has over 90 data centers with more than 600 megawatts of multi-tenant commissioned power. The market’s rapidly growing data center presence has been driven by Phoenix’s lower power costs relative to West Coast markets, abundant & affordable real estate, and tax incentives.
Dgtl Infra provides an in-depth overview of data centers in Phoenix, Arizona, including their power, connectivity, and customer characteristics. Additionally, we highlight Phoenix’s most critical data centers, such as Digital Realty’s carrier hotel at 120 East Van Buren Street, as well as CyrusOne’s scaled data center campus on South Ellis Street in Chandler, Arizona. Finally, Dgtl Infra identifies numerous reasons as to why there are so many data centers concentrated in Phoenix and its surrounding suburbs.
Phoenix Data Centers – Overview
Phoenix, Arizona and its metro area comprise the fourth-largest data center market in the United States with more than 90 data centers and over 600 megawatts of multi-tenant commissioned power. The market is also an important interconnection hub for the southwest region of the United States.
Historically, Phoenix has been considered a Tier-2 data center market, appropriate for backup, disaster recovery, and application hosting, while primary deployments would occur in major West Coast markets, such as Northern California (Silicon Valley) and Los Angeles. Lately, however, Phoenix has emerged as an established Tier-1 data center market, driven by significant demand from cloud service providers (CSPs), internet companies, and large enterprises.
In the Phoenix metro area, existing data centers are situated in clusters, with connectivity-rich retail colocation facilities positioned in the downtown area of Phoenix and close to Phoenix Sky Harbor International Airport, while large-scale, purpose-built wholesale data centers are primarily located 25 miles to the southeast of Phoenix, in the city of Chandler, Arizona.
In contrast, newer data centers in the Phoenix metro area are scattered throughout the surrounding cities of Mesa, Tempe, Scottsdale, Goodyear, and Deer Valley. Furthermore, several hundreds of megawatts of new data center development projects are planned for Mesa, Goodyear, Avondale, and Glendale, Arizona.
Since 2015, Phoenix’s data center market has scaled rapidly, growing 4x, from 150 megawatts to over 600 megawatts of multi-tenant commissioned power at present. As a result, Phoenix has become the fourth-largest data center market in the United States, recently closing its gap to Northern California (Silicon Valley) in terms of multi-tenant commissioned power.
According to Arizona Public Service (APS), the largest electric utility in Arizona, data centers are projected to create up to 640 megawatts of power capacity needs for the utility by 2035. To put the market into perspective, Phoenix is only behind Northern Virginia, the largest data center market in the world, in terms of future planned power capacity needs.
Arizona Public Service (APS), a subsidiary of Pinnacle West Capital Corporation (NYSE: PNW), is the largest electric utility in Arizona with over 6,300 megawatts of regulated generation capacity.
Electricity rates in the Phoenix area average between $0.055 to $0.07 per kilowatt-hour (kWh), placing the market among the lower power rates for Tier-1 data center markets in the United States.
Additionally, Arizona Public Service (APS) offers an extra-high load factor (XHLF) rate to data centers that consume at least 5 megawatts of energy at an average monthly load factor of 92% or more – making the Phoenix power market even more competitive. Specifically, APS estimates the cost per kWh for large data centers, using the example of a 10-megawatt facility at a 95% load factor, would be:
- Primary Service (12kV): $0.063 per kWh
- Transmission Service Rate (69kV): $0.058 per kWh
Beyond APS, Salt River Project (SRP) is a public electric utility serving the Phoenix metro area. Most notably, SRP has partnered with Meta Platforms (Facebook) on its new data center campus in Mesa, Arizona.
Overall, Phoenix has a reliable power grid and abundant access to renewable energy sources, particularly solar, but also wind, biomass, biogas, and geothermal power. Therefore, data center operators and their customers can readily support their sustainability goals by using Phoenix’s power supply.
Phoenix’s connectivity is characterized by having 3 main carrier hotels, namely Digital Realty’s 120 East Van Buren Street, phoenixNAP’s 3402 East University Drive, and Iron Mountain’s 615 North 48th Street – which are all located in the downtown area of Phoenix or nearby Phoenix Sky Harbor International Airport.
Phoenix’s strong fiber connectivity provides low-latency links to key western U.S. data center markets of Northern California (Silicon Valley), Los Angeles, and Las Vegas. At the same time, Phoenix acts as a gateway for connectivity between Dallas, Texas and these West Coast markets.
Overall, the greater Phoenix region is in the ‘top five’ for regional fiber-optic deployments in the United States with more than 156,000 miles of fiber-optic network capacity. As such, Phoenix is increasingly becoming a connectivity hub in the southwest region of the U.S.
Phoenix, Arizona – Fiber Network Map
Examples of enterprise and dark fiber providers operating in Phoenix include Alluvion Communications, Arelion, AT&T, Cogent Communications, Colt Technology Services, Cox Communications, Crown Castle, Fatbeam, Hudson Fiber, InnerCity FiberNet (ICFN), Intermountain Infrastructure Group (IIG), Lumen Technologies, redIT (American Tower), Spectrum Business (Charter Communications), Sprint (T-Mobile), SRP Telecom, Syringa Networks, Verizon, WANRack, Windstream, and Zayo.
Data Center Customers in Phoenix
Demand for Phoenix’s data center capacity is primarily driven by hyperscalers, which are cloud service providers (CSPs) and internet companies. These hyperscalers, many of which are West Coast-headquartered companies, are selecting Phoenix because it is a lower cost and less disaster-prone location, while it does not increase latency significantly (e.g., ~6 milliseconds round-trip to Los Angeles).
In particular, cloud service providers and internet companies such as Microsoft, Oracle, Meta Platforms (Facebook), Uber, Intel, PayPal, and Expedia are all significant customers of data centers in the Phoenix market.
Overall, demand for data center capacity in Phoenix has been increasing rapidly over the past several years:
- 2015 to 2019: less than 30 megawatts of absorption annually
- 2020: ~40 megawatts of absorption for the year
- 2021 and 2022E: ~90 megawatts of absorption annually
Phoenix’s strong recent data center demand has meant that its vacancy rate stands at ~8%, with a substantial portion of its capacity under construction already pre-leased.
Types of Data Centers in Phoenix – Colocation, Wholesale, Cloud
In Phoenix, there are three main types of data centers: retail colocation, wholesale, and cloud / hyperscale. Examples of the top data center providers in Phoenix from each category are listed below:
|Retail Colocation||Wholesale Data Center||Cloud / Hyperscale|
|Digital Realty*||CyrusOne||Microsoft Azure|
|phoenixNAP||Iron Mountain||Oracle Cloud|
|Cyxtera||Aligned Data Centers||Meta Platforms (Facebook)|
Beyond the retail colocation and wholesale operators listed above, other existing and emerging data center companies in the Phoenix market include: DataBank, EdgeConneX, EdgeCore Digital Infrastructure, Evoque Data Center Solutions, Expedient Data Centers, H5 Data Centers, Landmark Dividend, NTT Global Data Centers, QTS Data Centers, STACK Infrastructure, Stream Data Centers, and Vantage Data Centers.
In total, over 40 multi-tenant data center providers serve the retail colocation and wholesale segments of Phoenix. Generally, wholesale and hyperscale lease signings – meaning greater than 1 megawatt – account for ~90% of Phoenix’s market absorption. While retail colocation contract signings – meaning less than 1 megawatt – contribute ~10% of Phoenix’s market absorption.
Below we provide further detail on Phoenix’s most important retail colocation providers (Digital Realty and phoenixNAP), wholesale data center operators (CyrusOne and Iron Mountain), and cloud service providers (Microsoft Azure and Oracle Cloud).
Retail Colocation in Phoenix
Digital Realty – Data Centers in Phoenix
Digital Realty operates 2 data centers in the Phoenix area, which together comprise over 795,000 net rentable square feet (NRSF) and 42.5 megawatts of white space IT load. Specifically, Digital Realty runs the market’s primary carrier hotel, which is located at 120 East Van Buren Street in downtown Phoenix, Arizona (see below). Also, the company operates a large wholesale data center at 2121 South Price Road in Chandler, Arizona (see next section).
120 East Van Buren Street – Digital Realty
Digital Realty’s retail colocation data center at 120 East Van Buren Street in Phoenix, Arizona is the top interconnection facility for the metro area. Presently, over 36 carriers / network service providers serve the 175,000 square foot data center (288,000 square foot total building size).
Through 120 East Van Buren Street, Digital Realty connects the core infrastructure of many enterprises to several West Coast cities and global hubs. As such, the facility is a recognized fiber crossroads on almost every national network backbone.
Additionally, Digital Realty’s 120 East Van Buren Street data center provides access to two of the largest peering hubs or internet exchange points (IXPs) in the Phoenix market, namely Ninja-IX Phoenix (formerly Phoenix-IX) and DE-CIX Phoenix.
phoenixNAP – Data Center in Phoenix
phoenixNAP is a local provider which operates one data center at 3402 East University Drive, located east of downtown near Phoenix Sky Harbor International Airport. This 200,000 square foot retail colocation facility is another key carrier hotel for Phoenix, delivering connectivity to over 30 carriers and 60 total participants via two meet-me rooms (MMRs). Also, this facility is home to DE-CIX Phoenix, a major internet exchange point (IXP).
Additionally, phoenixNAP offers cloud on-ramps to Amazon Web Services (AWS) and Google Cloud through AWS Direct Connect and Google Cloud Interconnect, enabling companies to set-up private and secure access to their public cloud services.
Development Project – Phoenix, Arizona – phoenixNAP
phoenixNAP is currently building a new data center campus, adjacent to its flagship facility in Phoenix, Arizona, which will increase the company’s capacity. At full build-out, the new data center will provide 50 megawatts of power capacity across 500,000 square feet. Initially, the first phase of this development will support 10 megawatts of power capacity.
Wholesale Data Centers in Phoenix
CyrusOne – Data Centers in Phoenix
CyrusOne operates 7 data centers to the southeast of Phoenix, in the city of Chandler, Arizona, which collectively comprise 643,000 colocation square feet (CSF), 923,000 gross square feet (GSF), and 120 megawatts of available critical load capacity. Below is a further breakdown of CyrusOne’s 7 data centers in the Phoenix metro area, which are known as Chandler I, II, III, IV, V, VI, and VII:
|Data Center||City||Colocation sqft||Power|
|Chandler I – 2335 South Ellis Street||Chandler||74,000||12 MW|
|Chandler II – 2305 South Ellis Street||Chandler||74,000||12 MW|
|Chandler III – 2305 South Ellis Street||Chandler||68,000||18 MW|
|Chandler IV – 2495 South Ellis Street||Chandler||73,000||12 MW|
|Chandler V – 2405 South Ellis Street||Chandler||143,000||27 MW|
|Chandler VI – 2605 South Ellis Street||Chandler||148,000||24 MW|
|Chandler VII – 2705 South Ellis Street||Chandler||62,000||15 MW|
As shown below, CyrusOne’s Chandler, Arizona data center campus is situated on 85 acres of land which can ultimately house 10 facilities. At full build-out, the company will support up to 90 megawatts of critical capacity and nearly 2 million square feet of data center space at its Chandler campus.
Development Project – Mesa, Arizona – CyrusOne
CyrusOne is developing a second major data center campus in the Phoenix area, on a 68-acre land parcel in Mesa, Arizona. Upon completion, the new campus, located in the Mesa Elliot Technology Park (S 96th Street & E Elliot Road), is planned to have 5 facilities with up to 198 megawatts of critical power and 2.6 million square feet.
Iron Mountain – Data Centers in Phoenix
Iron Mountain operates 3 data centers in the Phoenix area – two of which are in the downtown district (AZP-1 and AZP-2) and one which is to the northeast, in the city of Scottsdale, Arizona (AZS-1). Presently, the company is developing further phases of its AZP-2 data center and it recently purchased a 10-acre land parcel and 50+ MVA substation to develop its future AZP-3 data center.
In total, at full build-out, Iron Mountain’s 4 data centers (AZP-1, AZP-2, AZP-3, and AZS-1) will be able to support 130.7 megawatts of power capacity across 1.49 million square feet.
In terms of connectivity, Iron Mountain’s AZP-1 data center at 615 North 48th Street in Phoenix, Arizona is another major connectivity hub for the market. Particularly, Iron Mountain offers connectivity to over 30 carriers / network service providers through this facility.
Digital Realty – Data Centers in Phoenix
Digital Realty’s wholesale data center at 2121 South Price Road in Chandler, Arizona is one of the largest data centers in Arizona, totaling 519,500 square feet with 34 megawatts of critical IT power. The building has a substation capable of providing up to 60 MVA of power to customers.
Examples of the large-scale cloud service providers (CSPs) and internet companies that Digital Realty’s Chandler, Arizona data center serves are Oracle, Expedia, FIS (Fidelity Information Services), and Charles Schwab.
Cloud / Hyperscale in Phoenix
Cloud service providers (CSPs) and internet companies, collectively known as hyperscalers, are actively developing new data centers in Phoenix. Specifically, Microsoft Azure, Oracle Cloud, Meta Platforms (Facebook), and Apple are hyperscalers with a meaningful and/or growing data center presence in and around the city:
Microsoft Azure’s West US 3 cloud region, known as westus3, has 3 availability zones and is located in Phoenix, Arizona. Additionally, Microsoft Azure’s US Gov Arizona cloud region, known as usgovarizona, has 1 availability zone and is located in Phoenix, Arizona.
To support these cloud regions, Microsoft has made a $1 billion capital investment in the Phoenix area, which includes its data centers in Goodyear and El Mirage, Arizona.
Oracle Cloud operates 3 different cloud regions in Phoenix, Arizona:
- US West (Phoenix) cloud region, known as us-phoenix-1, has 3 availability zones
- US Gov West (Phoenix) cloud region, known as us-luke-1, has 1 availability zone
- US DoD West (Phoenix) cloud region, known as us-gov-phoenix-1, has 1 availability zone
Meta Platforms (Facebook)
In 2021, Meta Platforms (Facebook) broke ground on its Mesa, Arizona data center campus located at 3841 S Ellsworth Road, with its initial buildings expected to come on-line in Q4 2023. Overall, the company is building 5 data centers at this campus as part of a more than $1 billion investment, which will ultimately span a total of 2.5 million square feet.
Apple’s Mesa data center is located at 3740 S Signal Butte Road in Mesa, Arizona and is situated on 83 acres of land. Following $2 billion of investment by Apple, this 1.3 million square foot data center serves as a key logistics and operations hub, supporting all of Apple’s data centers around the world.
READ MORE: Apple’s Data Center Locations
Amazon Web Services (AWS)
In July 2020, Amazon Web Services (AWS) purchased 91.5 acres of land in Goodyear, Arizona – at Cotton Lane and Indian School Road west of Loop 303 – for a future data center development project.
Presently, Amazon Web Services (AWS) does not have a cloud region in Arizona. However, the company has an AWS Local Zone facility in Phoenix, with its parent region being US West (Oregon).
Why are There So Many Data Centers in Phoenix?
In Phoenix, there are so many data centers because of the city’s lower power costs relative to proximate markets, abundant & affordable real estate, inexpensive operating costs, low natural disaster risk, tax incentives to promote data center growth, and strong economy.
At an average range of $0.055 to $0.07 per kilowatt-hour (kWh), Phoenix has relatively low power rates for Tier-1 data center markets in the United States. More importantly, Phoenix compares especially well to proximate West Coast markets of Northern California (Silicon Valley) and Los Angeles, which charge up to double the power rates:
- Santa Clara: electricity rates average ~$0.10 per kWh
- Silicon Valley (excluding Santa Clara): electricity rates average between $0.12 to $0.15 per kWh
- Los Angeles: electricity rates average between $0.10 to $0.145 per kWh
Additionally, in the Phoenix metro area, power is readily available, which is in contrast to Northern California’s constrained power supply – particularly in major sub-markets like Santa Clara and San Jose.
2) Real Estate
Phoenix’s desert terrain and generally flat topography provides an abundance of developable land and coupled with affordable prices, makes the market ideal for building large-scale data centers. Indeed, Phoenix ranks as the second lowest (behind Dallas, Texas) in terms of average cost per acre for land, as compared to other Tier-1 data center markets in the United States.
Overall, Phoenix’s market characteristics have enabled single site acquisitions to comprise hundreds of acres of land for the purposes of data center development. For example, in June 2022, QTS Data Centers purchased nearly 400 acres of land in Glendale, Arizona for more than $255 million, equivalent to $637,500 per acre.
3) Operating Costs
The cost of doing business in Phoenix is below the national average and data centers in Phoenix have a low total cost of ownership (TCO), with labor costs being a major factor. This is especially true when Phoenix is compared to nearby West Coast markets of Northern California (Silicon Valley) and Los Angeles.
As such, data center operators in Phoenix can offer some of the lowest lease rates for retail colocation and wholesale data center capacity, relative to other Tier-1 data center markets in the United States. In turn, this attracts demand from price-sensitive customers and particularly those that have large-scale workload demands.
4) Natural Disasters
Phoenix faces a low risk of natural disasters. Historically, the market has not experienced major hazards such as earthquakes, tornadoes, hurricanes, tsunamis, wildfires, floods, or hailstorms. As a result, Phoenix offers less risk of downtime and greater physical security for data center infrastructure.
The State of Arizona offers a 10-year exemption on state, county, and local sales tax on both data center equipment purchases and labor services. Moreover, if the data center qualifies as a Sustainable Redevelopment Project, the exemption is increased to 20 years. Notably, customers of data center operators qualify for these tax exemptions as well if they contract with a qualified data center operator for at least 500 kilowatts of power capacity for a term of 2 years or longer.
Additionally, the State of Arizona is pro-business with its personal property tax policy. Specifically, a hyper-accelerated depreciation policy under the Arizona Competitiveness Package reduces the taxable assessment on a property by 75% in the first year.
Historically, Phoenix’s economy has grown by around 4% to 5% annually and the region currently has an unemployment rate of ~3.5%, positioning both metrics favorably to U.S. averages.
What are the Challenges to Phoenix’s Data Center Market?
While Phoenix’s data center market enjoys strong demand drivers, the market also faces certain fundamental challenges to data center growth, including a hot climate, potential restrictions on data center development led by water usage concerns, and intense competition on lease pricing.
- Climate: Phoenix has a hot climate and the highest number of cooling degree days (CDD) among Tier-1 data center markets in the United States. Counter-balancing these concerns, the market has a dry climate with low humidity (ideal for data centers) and at nighttime ‘free cooling’ is possible, which uses the naturally cool air outside of data centers for cooling
- Water Usage: historically, Phoenix has had no restrictions on industrial water use. However, this has the potential to change as local governments (e.g., Chandler, Arizona) encourage data centers to use air conditioning rather than water-based cooling systems. Ultimately, this issue could lead to zoning restrictions or a limitation on new data center developments
- Competition: lease pricing is competitive for wholesale and hyperscale transactions from data center providers in Phoenix. Moreover, Phoenix has significant further capacity under planning, led by well-funded competitors like Aligned Data Centers, NTT Global Data Centers, QTS Data Centers, STACK Infrastructure, and Vantage Data Centers – which could increase competition further